Saudi Arabia is determined to restore the balance on the oil market and is cutting deeper than required in the OPEC+ deal, with February crude production likely close to 10.1 million bpd, compared to the 10.3-million-bpd ceiling in the production cut agreement, Saudi Energy Minister Khalid al-Falih told Bloomberg Television in an interview.
Under the OPEC/non-OPEC deal for a total of 1.2 million bpd cuts between January and June, Saudi Arabia’s share is a cut of 322,000 bpd from the October level of 10.633 million, to reduce output to 10.311 million bpd.
Al-Falih said that the Kingdom will be “well below” its ceiling for the full six months, unless unforeseen market deficits require an intervention to lift production, as it happened last June with the ramp-up ahead of expectations of ‘zero’ Iranian oil exports.
Since December, Saudi Arabia has cut close to 1 million bpd in production and exports, and this “will trickle down the markets over the next few weeks,” al-Falih told Bloomberg.
In January, Saudi crude oil production has been around 10.2 million bpd, and will be further cut to close to 10.1 million in February, the Saudi energy minister noted.
The majority of Saudi cuts in exports will be on the U.S. market, as it makes no commercial sense for the Kingdom to export too much oil to the United States, which is well supplied by its own production and other producers in the Western hemisphere, al-Falih said.
Commenting on fundamentals, the minister said that “demand will start picking up towards the end of the first quarter and into the second quarter.”
The Saudis don’t know what impact Venezuela’s turmoil will have on the market, or how demand will hold up in emerging Asia, but what’s certain is that the Kingdom of Saudi Arabia and like-minded countries within the 25 group “are determined to do what we did in 2017-2018—drive inventories down,” al-Falih said.
“We should never really let our hands off the wheel,” the minister noted, referring to the current OPEC intervention on the oil market.
“If we let the market to its own devices, we’ll lose control, that’s why I would never say ‘mission accomplished’,” al-Falih said.